Morningstar: 4 Percent Rule May Be Safe Again

Morningstar: 4 Percent Rule May Be Safe Again

A new report from Morningstar suggests that the “4 percent” rule may be a safe option for retirees once again as investment portfolios recover from last year’s losses.

The 4 percent rule suggests that retirees can make their retirement account last 30 years if they withdraw no more than 4 percent of the funds annually, then adjust subsequent withdrawals for inflation.

Why it matters: The market volatility of recent years made that rule riskier. Morningstar’s recommended safe withdrawal rate was 3.3 percent in 2021 and 3.8 percent in 2022.

What they’re saying: “As yields on bonds and cash have increased, the forward-looking prospect for portfolio returns—and in turn the amounts that new retirees can safely withdraw from those portfolios over a 30-year horizon—have continued to edge up since we covered the topic last year,” says Amy C. Arnott, CFA.

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Darryl Hicks

Darryl Hicks is Vice President of Communications for the National Reverse Mortgage Lenders Association. In this capacity, Hicks writes for NRMLA's publications, manages the association's web sites and social media accounts, assists committees and the Board of Directors, and manages the Certified Reverse Mortgage Professional designation. Prior to joining NRMLA in 1999, Hicks spent three years in the Washington, D.C. bureau for National Mortgage News.